On interest rates: We have a symmetric approach to our inflation target, and we need to ensure that inflation returns to our target in a sustainable manner. We need to be data dependent and assess the risks to our outlook. The recent data on inflation has been lower than expected, so we need to consider all options, including the possibility of a 50-basis-point rate cut.
Overall, policymakers across Europe are closely monitoring the economic data and inflation outlook to determine the appropriate course of action. The discussion on interest rates and the potential for further cuts will continue in the coming months as central banks strive to support economic growth and achieve their inflation targets.
So it has been a key factor that led us to decide on rate cuts last week, reducing rates by 25 basis points in Europe. This decision was driven by the fact that disinflation is progressing as expected and that we are witnessing a weaker growth outlook, which is further exacerbating disinflationary pressures.
Regarding rate cuts, the path forward is clear. We are continuing with the cycle of rate cuts. The pace and extent of rate cuts will be determined by incoming data. We are specifically looking at three variables in this regard: inflation output, underlying inflation (adjusted for energy and food prices), and the effectiveness of monetary policy transmission. This approach is data-driven, and for me, it goes beyond just focusing on individual data points. It is more about analyzing the overall picture.
Gediminas Šimkus, Bank of Lithuania
Regarding rate cuts, it is evident that we are moving towards easing monetary policy. In the upcoming meetings, we can expect to see some rate cuts. The magnitude of these cuts will depend on the data available at the time of the decision.
I do not believe that significant rate cuts are justified unless we observe something truly unexpected and negative in the data. So far, we have not encountered such a scenario. However, the decision made in October truly exemplifies what it means to base our decisions on data. When the data indicated a need for action, we took the necessary steps.
Boris Vujčić, Croatian National Bank
Regarding the economy, the situation in Europe is not as promising as it was six months or even three months ago. Current PMI indicators point towards a slowdown in economic activity. This slowdown is a combination of structural and cyclical factors. While lowering rates can address the cyclical component, structural issues will need to be tackled in the medium term.
As for rate cuts, I am open to discussing potential actions in December. Personally, I do not have a predetermined decision, nor do I believe it is appropriate to have one at this stage. We need to remain data-dependent and refrain from speculating on whether there will be a 25 basis points cut, a 50 basis points cut, or a pause in December. The final decision will be contingent on the data that emerges.